Disadvantages of Debt Counselling

There are disadvantages to applying for debt counselling. It is imperative to weigh the disadvantages of debt counselling from the advantages before applying. However, if one is deep in debt, the disadvantages of debt counselling outweigh the advantages.  Here we discuss the disadvantages of debt counselling.

• In terms of section 88(1) of the National Credit Act No. 34 of 2005, you must not incur any further charges under a credit facility or enter any further credit agreement whilst under debt review.

• If the consumer misses his or her monthly payments while under debt review, credit providers terminate the application and institute legal action. It is important that the consumer sticks to the amount that was agreed to on the court order.

• Not all accounts can be accepted on debt review. If there is a judgement (summons) on a home loan or motor vehicle, accounts cannot be included under debt review.

• Once a debt review court order has been obtained a consumer cannot terminate or withdraw from debt counselling.  As part of the debt review process, the consumer can however approach the court to rescind the order or apply for an order which declares that the consumer is no longer over-indebted. This can be costly to process.

• If you are married in COP and one is not struggling, you both have to apply.

• You might take longer to pay off your debt as a result of paying lower monthly installments.

• Fees become payable while under debt review in month 1 and these fees are set by the law. Legal fees also become payable in month 2. Legal fees vary from one debt counsellor to the other. Most of these fees are however be worked into your repayment plan.